What is future trading, call and put trading in share market?



Actually I have a little knowledge about share market. I know about purchasing and selling of shares through demat account but I am unaware of these type of tradings. One of my friend told me that you can earn more money in these type of tradings.
Is it true? Please help me

3 Replies to “What is future trading, call and put trading in share market?”

  1. futures and options (call and put) are much more speculative in nature. Although buying stocks is speculative, however, when people buy into stocks they’re looking into steady long term growth or current income through dividends. With futures and options you are betting strongly for or against the market. You can either sell options or buy options. When you sell options you make money on the premiums on the options, when you buy options you can only make money if the stock does either really well or tanks depending on if you bought a call or a put. You can have limitless growth or loss depending if you took the position of long or shorting the option. Option and future tradings are shorter term in nature and again highly speculative as you are going against the market trends and betting on it. You can make endless money, but you can also lose it very quickly.


  2. First of all, Options and Futures are two different things.

    Call options are options that allows you to buy the underlying stock at a fixed price (the strike price) any time in the future. This means that the higher the underlying stock goes, the more you make when you buy call options.

    Put options are options that allows you to SELL the underlying stock at a fixed price any time in the future. This means that the LOWER the underlying stock goes, the more you make when you buy put options.

    The beauty of options in directional speculation is actually leverage. You stand to make as much as 10 times more profit than you would if you bought the underlying stock BUT you could also stand to lose all the money you use toward the purchase of the options if the trade didn’t work out right. This is why you should always use only money you can afford to lose in options trading which means using much lesser than you would if you bought stocks and therefore reduced overall portfolio leverage anyways.

    You don’t need to own the underlying asset before you can buy call options or put options. When you buy call option or put option, the most you can lose is the money you use to buy them. However, in futures trading, you can lose MORE than what you use to put on the position and get margin calls whenever your account runs below the maintenance margin. All in all, if you use only money you can afford to lose on options, it is safer than futures.


  3. Basically these are geared products. You can get a lot more profit from your money, but unfortunately also lose a lot more. I shouldn’t listen to your ‘friend’. A futures contract is buying something for the future. You put up a deposit to buy something at a set price at a set date in the future. You can sell the same contract before you have to take delivery so you don’t have to pay the full amount. Calls & puts are options. They are similar. You pay for the option to buy, or sell , something at a set price for a set period. There is a lot more factors involved in pricing options, like volatility, as well as time. As opposed to futures which are really just time.
    If you have little knowledge of share market I advise you to keep away from these derivatives.





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